Citing Development Budget Coordination Committee (DBCC) projections, a senior legislator said debt as a share of gross domestic product (GDP) could fall to 63% by the end of the year following a slowdown in growth in the third quarter.
Senator Sherwin T. Gatchalian, chairman of the Senate Finance Committee, said the DBCC's projections indicate a continued breach of the 60% threshold considered sustainable for developing countries, despite expectations that the government will meet its budget deficit target.
“Despite headwinds, natural disasters (and) low growth forecasts, we will still end up with (a) 5.5% deficit and (a) debt-to-GDP ratio of 63%,” Mr Gatchalian said during a hearing on the 2026 national budget on Thursday.
The Finance Department had projected a ratio of 61.3% for the year.
Mr. Gatchalian said the Philippines is in a better position than its ASEAN peers.
“After the pandemic, a lot of countries … are at slightly higher levels of deficit ceiling and debt-to-GDP ceiling,” he said. “In ASEAN, we are a little better than our peers, (who are) burdened with debt at about 70% of GDP.
In the third quarter, the debt-to-GDP ratio was 63.1%, which Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, called “manageable.” The same ratio was recorded in the second quarter also.
“Given that many countries at a similar stage of development as the Philippines have similar debt-to-GDP ratios, this level in itself is manageable,” Mr Chanco said. businessworld“What is more worrying than the level is the trajectory, as the sustained decline in this ratio before Covid has clearly reversed,”
Mr Gatchalian said the DBCC is still hoping to restore the debt-to-GDP ratio to pre-pandemic levels.
“The DBCC is very conscious of our debt stock and they are very strict in adhering to the medium-term fiscal framework… which will gradually reduce our debt-to-GDP ratio by reducing our deficit, hopefully reaching pre-pandemic levels over the next few years.”
The DBCC maintained its budget deficit this year at 5.5% of GDP or P1.56 trillion.
“There are a lot of headwinds and events beyond our control, for example typhoons,” Mr Gatchalian said. “But regardless, we will reach (our) target deficit of 5.5%.” , Katherine K. chan
